Senate Committee Votes To Use Pension Savings To Plug Budget Holes

Senate Budget & Taxation Committee Chairman Ed Kasemeyer talks about using pension savings to balance the budget and not shore up the state employee pension fund. Download This File

More money once planned to reinvest in Maryland's state employee pension system is being tapped to fill a state budget hole.

A Senate budget panel made the decision Friday.

Under pension reform three years ago, Maryland was to pay $300 million above its required pension payment each year to move gradually to fully funding the pension system. Gov. Martin O'Malley proposed capping the payment at $200 million this year to help fill a budget gap.

Now, with a $238 million downward revision in state revenues creating a bigger hole, senators have decided to make only a $100 million payment for fiscal year 2014 and fiscal year 2015. That frees up money the remaining $200-million to ease budget pressures.

Union representatives for workers said they approved the idea to protect salary increases from cuts.

"We support this plan because it protects pension benefits in the long run while securing fair pay in the short run," said Sue Esty, assistant director of the Maryland chapter of the American Federation of State, County and Municipal Employees.

Senators emphasized that the decision on Friday won't affect pension payments to state employees.

The Senate budget panel decided to slowly increase the payments in future years. For example, the panel decided to bring the additional payment up to $150 million in fiscal year 2016, $200 million in fiscal year 2017 and $250 million in fiscal year 2018. In fiscal year 2019, the full $300 million payment would be made.

Treasurer Nancy Kopp and Comptroller Peter Franchot have criticized the move. Last week, they told lawmakers it would hurt the stability of the pension fund, and the state's Triple-A Bond Rating.

Committee Chairman Ed Kasemeyer told WBAL News this morning that this would not hurt the pension fund.

"We have over $43-billion in the pension fund. The bond rating houses knew what we were going to do, and they didn't have any problem. We don't think it puts anyone, or anything at risk," Kasemeyer told WBAL News.

The full Senate is expected to consider the issue next week.

Lawmakers have until March 31 to approve a new state budget, but they will likely continue their work on the budget into early April.